It's important to check with all documentation (Legal documents) before investing in land, from 7/12 to local body approvals. Technical due diligence should also check with zoning, FSI, etc for checking development on land.
Wrong Valuation
LAND TRANSACTION STORY
Bank old customer Mr. 'loan borrower' took a loan of 50 Lakhs from 'We want to make money bank'. After crediting loan amount to customers’ accounts, bank was waiting for returns.
After a year Mr. Loan borrower was caught up in tough situation where he was not able to pay loan back!!!
So now what, Bank gave him 1st notice, 2nd notice and then bank decided that this fellow don't have any money, so bank told him we need a asset of you which will cover the loan amount+ interest on it.
Mr. Loan borrower said, Sure sir I have a plot in my village I am ready to sale it sir!!!
Bank said, okay okay cool, we will not take it easily we will do our due diligence on that land, we will understand the market of your village first, then we will liquid your loan amount.
So, bank hire a valuation company and tells them, Sir we need this land to be around 50-55 lakhs as we have to complete this transaction!
Valuer said, sure sir, we will do our due diligence and let you know the 'market value' of land! After a week, Valuer comes to a land rate!!!
Guess what happened?
Valuer says to bank that, Sir this land is on mountain and we are not able to go there, actually no one
can go there, there is river in between and we don't no how risky it will be in future to come here!!!
Banker said, what are you saying, Its a high time buddy we have to sell this land as soon as possible, tell me the market value, I will see what to do!
Valuer said, Sir the fair market value is ₹ 10 lakhs and realizable sale value is ₹ 9 lakhs and
force/distressed value is ₹ 8 lakhs and here is the report which contains technical and economical aspects of land, here you go sir!!!
Banker said, okay, let me see, he decided we are doing this deal for ₹ 50 lakhs!!!
The reason for closing the case was because bank wanted to close the case, here bank was free from this case Mr. loan borrower was free from this case!!!
But do you know who was in conflict?
The real estate of that area, when this transaction took place, surrounding people who will sell the land, will think to increase the rate, whereas buyer will be in trouble for buying land in high rate!!
Upcoming transaction will happen, referencing to this transaction because as the agreement signed has value of ₹ 50 Lakhs and it is noted down in government book as well (Sale instance)!
Tomorrow when bank will do neelami of this land as 'foreclosed land' then again it will be a conflict to sell it and surely someone will buy it and the game will never stop!!!
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